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Investors & Commentators digest End of Oil

Written by Joel Kenrick

Commentators and business analysts use the opportunity of the launch of the Tesla Model 3, UK decision to phase out petrol and diesel cars by 2040 to look at how big oil is dealing with trends in the industry.

Ambrose Evans-Pritchard, International Business Editor for theDaily Telegraph writes that "Opec, Russia, and Big Oil thought they had half a century to prepare for the end of the internal combustion engine. At best they have a decade before the threat turns deadly serious." ... "Once governments reset policy in this fashion, markets rush to take advantage. They accelerate the time-table. The inevitability factor turns against the status quo and shifts with pent-up force in a new direction." ... "My guess is that petrol stations will go into run-off and become scarce in culturally-green hotspots relatively soon. Spare parts for fossil cars will be less easy to find. As these supply risks seep into public consciousness, the switch to EVs will turn into a stampede. ...

"My own view is that we now have an unstoppable confluence of market forces, new technology, and green policies that are reinforcing each other and cannot be stopped even by Donald Trump." ... "Which begs a question: why would anybody purchase shares in a company like Aramco that was valued at $2 trillion in an old energy order that longer exists? (Opec and the oil barons face a slow death by electrification, Daily Telegraph, 26 July)

World oil demand could peak in 2024 on higher vehicle efficiency -Goldman Sachs: 'The global electric fleet [...] is expected to grow more than 40-fold to 83 million vehicles by 2030, from 2 million in 2016.(Reuters, 24 July)

How electric vehicles could take a bite out of the oil market: UC Davis researchers Amy Myers Jaffe & Lewis Fulton summarise their research, concluding that 'Overall, we believe there is a reasonable chance global oil consumption will peak by 2040. ... a shift away from cars with internal combustion engines – and from cars in general – looks not only likely but inevitable. It also seems fairly likely that any company betting on the continued growth of oil sales will be disappointed.' (The Conversation, 27 July). In the Financial Times Min Zhu, a former deputy managing director of the International Monetary Fund, writes that 'Emerging market demand for oil in vehicles will dissipate faster than many expect' (The oil price is living on borrowed time, 19 July).

Investors to Big Oil: Restrain Yourselves reads the Wall Street Journal headline (26 July). Sarah Kent reports that 'Three years into an oil-price slump, investors want the world’s biggest oil companies to do something they have historically struggled with: Maintain some financial discipline.' WSJ have previously analysed different peak oil demand predictions of big oil companies, ranging from 2025-30 (Shell) to not foreseeing a peak (Chevron & Exxon Mobil). (Get Ready for Peak Oil Demand, 26 May)

What oil companies and car companies are saying is diverging. This is a trillion dollar question, and somebody is going to be wrong.Colin McKerracher, head of advanced-transport analysis at BNEF tells Bloomberg (Big Oil Just Woke Up to Threat of Rising Electric Car Demand, 14 July)

... meanwhile David Crane, former CEO of NRG Energy, the US coal-based domestic power-generation company, writes on how shareholders and CEOs still seem to favour short- to medium-term share price appreciation over long-term prospects. (Inside the rise and fall of NRG’s green strategy, GreenBiz, July 17)

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